More fun in the bond markets this week. Firstly, the entire Dutch yield curve has gone negative. So, lend them money for thirty years. In 2049, get back less. Good deal?
Then, look at the performance of the Austrian 100 year bond up over 50% in the quarter and has more than doubled since launch. Depending how you calculate it, bond prices are now at 3,000 year highs.
If you are running for cover in the financial markets, here are some options.
1. A 2 year Swiss bond yielding -1.08%
2. A 50 (fifty) year Swiss bond yielding -0.45%
3. Buy bitcoin
China’s Digital Currency
“People’s Bank digital currency can now be said to be ready.”
A senior official at the People’s Bank of China announced this week that a fully operational prototype of a digital currency was ready to be rolled out. Apparently, this has been in development since 2014 and uses blockchain technology (albeit in an unspecified way).
Not much more detail than that, but it’s increasingly obvious that China is miles ahead of the rest of the world when it comes to payments. Almost everyone in China uses WeeChatPay and Alipay to make daily transactions. In the US, many people still get paid with old fashioned paper cheques – they are decades behind.
The US is tieing itself in knots over this stuff. Maybe Facebook will launch Libra, but not before China goes first.
A few months back Binance (the world’s biggest crypto-exchange) announced they were closing to US customers pending a relaunch under US regulations. We got some news of their plans this week with the first suite of products unveiled in the graphic below.
Binance have done amazing things for the last two years and I wouldn’t want to bet against them being successful in the US. That said, I much prefer the economic prospects of their token to some of those they plan to list.
Argentina’s markets took a huge hit (>25% fall) on the back of the result of an election primary. Both the Merval (Argentinian stock market index) and the Peso were down significantly as the primary result could see a move away from the austerity measures implemented by the current government.
The chart below is telling, the stock market in local currency has soared since 2010 but in USD terms it has gone nowhere. I believe the same is true of more developed markets, money has been printed, much of that money has gone into the stock market (mostly through buy backs) and the stock market is down in the last 10 years against hard assets like bitcoin. It’s not just Argentina with their head in the sand, it’s us too.
Bitcoin dominance is a measure of bitcoin market cap as a percentage of all other cryptocurrencies. It fell to 35% at the peak of the ICO boom. That figure now approaches 70% and has been rising all year. Many ICO projects are now running out of money and failing to deliver on tecnical promises. As Warren Buffet says, only when the tide goes out do we find out who is swimming naked. Well in this case, it’s like a pool party at the Playboy Mansion.